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Friday, August 2, 2013

Attracting and Retaining -- The Role of Employer-Provided Health Care

I read the results of what I found to be an interesting survey this morning. The ADP Research Institute did a survey entitled "The Role of Employer Benefits in Building a Competitive Workforce." The good news about the survey summary is that it provides some excellent insights related to employer-provided health care benefits. The bad news is that either that's all the survey covered, or that's all the authors of the report found interesting.

In any case, according to the survey, nearly half of employers think that the health care benefits that their company provides to employees can be a differentiator when it comes to attracting and retaining employees. Fewer than 10% think that the health care benefits they provide are not particularly important in this regard (smaller employers are far more likely to say this).

Similarly, nearly half of employers think that the health care benefits that they provide to their employees are better than other companies in their industry. Only about 10% think they are worse.

Once upon a time, I was a student of high-level mathematics. I taught math at the college level. I passed actuarial exams on mathematical topics, generally with high scores, on my first attempt. The math here just doesn't work.

Perhaps when one becomes an HR leader (respondents were intended to be HR leaders), one is awarded with a pair of rose-colored glasses. If I were to take a similar survey, but ask employees rather than employers, I think that more than half of employees would say that their employer's health care plan is worse than average.

Why? Frankly, most plans have gotten worse for employees in recent years. Co-pays have increased. The employee's share of the premiums has increased.

I'm not saying that I can blame employers. Health care inflation has far outstripped general inflation and many companies, especially in a weak economy, cannot afford to pick up the inflationary increases in costs.

All that said, I am going to draw my own conclusions. I do this based on a single data point; that is, I draw it based on what I have learned in recent years by being in a health plan, talking to other people in health plans, talking to employers who sponsor health plans, and reading survey results like those from the ADP Research Institute.

In most job classifications, the primary differentiator in influencing a potential employee's decision to work for a company or not is compensation -- cash and cash-like (think equity compensation). Beyond that, it is the impression that the potential employee has gotten about what it's like to work for the company. If it's a great place to work, pay matters a little bit less. If it's a horrible place to work, you have to pay a lot. After that comes benefits. But, think about it. What do most potential employees ask about a benefits program before taking a job?

When do I get health care benefits?

Do you have a 401(k) plan that I can participate in?

How much vacation time do I get?

How much sick time do I get?

Most potential employees are not sophisticated enough to ask about the health care plan design. Even if they ask, they probably won't understand the answer. Many employees think all 401(k) plans are the same (I never believed this, but I started asking people and that is what I learned).

Where I think that the difference in health care plans is large is in retention and in word-of-mouth recruitment. If a company has a great health care plan, its employees will talk to their friends about it. They will not be inclined to leave the company and give them up. On the other hand, if the health care plan is not good, water cooler talk will predominate. This may actually cut into productivity and those employees will certainly not recommend the company to their friends.

It's a tangled web, and clearly, HR leaders have not figured out how to untangle it. It's just my opinion, but in my blog, my opinion gets to be front and center. If your opinion is different, leave a comment, or write your own blog.

Disclaimer

The opinions expressed in this blog are not those of anyone but the author of the particular post or comment. Nothing in it is to be construed as the opinion of any employer unless specifically disclosed as such.

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